Keystone XL: Trans-Canada not giving up, forges ahead on 2 fronts

Reporting from Seattle — The Canadian pipeline company thwarted last year in its bid to build the 1,700-mile Keystone XL oil pipeline from Canada to the Texas Gulf Coast hasn't given up. The company on Monday announced its intention to reapply for a permit for the project -- and to proceed immediately with plans to build the southern portion of the pipeline, from Oklahoma to the coast.

The news is sure to reignite the debate over the controversial pipeline plan, but it was welcomed by President Obama as a means of providing a route to market for large quantities of domestic oil produced in Montana and North Dakota.

Trans-Canada does not need an international permit to commence construction on the portion of the pipeline slated to run between Cushing, Okla. -- currently glutted with oil produced further north -- and refineries in Port Arthur, Texas, that are looking for cheaper domestic oil as an alternative to imported crude.

"As the President made clear in January, we support the company’s interest in proceeding with this project, which will help address the bottleneck of oil in Cushing that has resulted in large part from increased domestic oil production, currently at an eight-year high," the White House said in a statement Monday.

Trans-Canada President Russ Girling said the company will proceed with the southern portion of the pipeline as a stand-alone project at an estimated cost of $2.3 billion, to be completed in mid- to late 2013.

At the same time, he said, the company will submit a new application for the more problematic northern portion of Keystone XL, which U.S. officials have said must be rerouted away from the sensitive Sand Hills of Nebraska above the Ogallala aquifer.

Obama rejected TransCanada’s application in January when Republican members of Congress moved to push the project forward without time to review the Sand Hills route or other environmental issues.

"Our application will include the already reviewed route in Montana and South Dakota,” Girling said in a statement. “The over three-year environmental review for Keystone XL completed last summer was the most comprehensive process ever for a cross-border pipeline. Based on that work, we would expect our cross-border permit should be processed expeditiously and a decision made once a new route in Nebraska is determined."

The White House appeared to concur, saying that House Republicans "forced" the earlier rejection by "not allowing sufficient time for important review or even the identification of a complete pipeline route."

"We commit to take every step possible to expedite the necessary permits," the statement said.

The Keystone XL pipeline has run into strong opposition from environmental groups across the U.S., not just because of the route through the Sand Hills, but because of concerns that it will promote the production of carbon-intensive oil extracted from tar sands in Canada and will elevate levels of air pollution around Texas refineries.

The new permit application is almost certain to turn into a renewed battle over environmental costs versus the jobs, indirect economic benefits and tax revenues the pipeline would bring -- a key point of attack by Republicans on Obama’s energy policy.